As per the existing policy on the subject, the eligible borrowers in the telecommunication sector are permitted to avail of ECB for the purpose of payment for spectrum allocation, under the automatic route. Successful bidders of 3G auction are also permitted to make the payment for spectrum allocation initially out of Rupee resources to be refinanced with a long-term ECB under the approval route subject to certain conditions.
On a review of the ECB policy and keeping in view the large outlay of funds required to be paid directly to the Government within a limited period of time, the Reserve bank of India vide A.P. [DIR Series] Circular No. 54 dated November 26, 2012 has made the following relaxations for the 2G spectrum auction:-
- Refinancing of Rupee resources
The successful bidders making the upfront payment for the award of 2G spectrum initially out of Rupee loans availed of from the domestic lenders would be eligible to refinance such Rupee loans with a long-term ECB, under the automatic route, subject to the following conditions:
- the long term ECB shall be raised within a period of 18 months from the date of sanction of such Rupee loans for the stated purpose from the domestic lenders;
- the designated AD Category I bank has evidenced the payment of upfront fees to Government of India in the form of a Receipt/ Challan from Department of Telecommunication; and
- the designated AD - Category I bank shall monitor the end-use of funds.
- Relaxation in ECB-liability ratio and percentage of shareholding
The successful bidders in the 2G auction will be allowed to avail of ECB under the ‘automatic route’ from their ultimate parent company without any maximum ECB liability-equity ratio subject to the condition that the lender holds minimum paid-up equity of 25 per cent in the borrower company, either directly or indirectly.
- Bridge Finance facility
The successful bidders can avail of short term foreign currency loan in the nature of bridge finance under the ‘automatic route’ for the purpose of making upfront payment towards 2G spectrum allocation and replace the same with a long term ECB under the automatic route subject to the following conditions:-
- the long term ECB is raised within a period of 18 months from the date of drawdown of bridge finance; and
- the long term ECB is in compliance with all the extant guidelines on ECB.